Demand for an item is 16 units a week. The unit cost of each item $5,000, while the ordering costs from Malaysia is $1000. The lead time is around 4 weeks and holding costs are around 16%. What inventory policy would you recommend? b. What would be the optimal time between consecutive orders? c. The supplier is planning to increase the lead time to six weeks. How would your policy in part (a) change? How would your ordering costs and holding costs change and why? а.
Demand for an item is 16 units a week. The unit cost of each item $5,000, while the ordering costs from Malaysia is $1000. The lead time is around 4 weeks and holding costs are around 16%. What inventory policy would you recommend? b. What would be the optimal time between consecutive orders? c. The supplier is planning to increase the lead time to six weeks. How would your policy in part (a) change? How would your ordering costs and holding costs change and why? а.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Please answer all parts of the question.
Transcribed Image Text:2. Demand for an item is 16 units a week. The unit cost of each item $5,000, while the ordering costs from
Malaysia is $1000. The lead time is around 4 weeks and holding costs are around 16%.
a. What inventory policy would you recommend?
b. What would be the optimal time between consecutive orders?
c. The supplier is planning to increase the lead time to six weeks. How would your policy in part
(a) change? How would your ordering costs and holding costs change and why?
d. If there were another supplier with higher ordering cost ($1200) but shorter lead time (2 weeks),
would you take it? How would your inventory policy change?
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